How to Minimize Your Capital Gains

How much you pay in capital gains will depend on several factors including how long you have held the asset.

Short-term gain is an asset for a year or less and is taxed at your ordinary tax rate which currently can be as high as 35 %.

Long-tern gain is any asset held more than a year and the highest maximum tax rate is currently set at 15 % less for those in a much lower tax bracket.

When you purchase mutual funds, keep records as to all your distributions including dividends and capital gains. Add those annual amounts to your cost basis which will lower your taxable transaction when you finally sell the mutual fund.

Use the “average cost” method when selling your mutual funds, your fund should be able to provide you with that amount.

When selling stock, use the specific share method if you purchased additional shares of the same stock over a period of time. The IRS will assume you used the FIFO method if you haven’t chosen an alternate method; this means it will assume you sold the shares in the order you purchase them.

Don’t forget it is in your best interest to keep detail records as to your purchases and sales of any asset you have acquired. Record the date, asset, purchase amount, transaction costs and any distributions you receive over the life of the asset.

In the case of your home or real estate, keep records of any additions (home improvements) to your home or property such as adding a pool or deck after the initial purchase.

Daniel Iuculano, AAMS CMFC

Financial & Wealth Planner